The news that over 8000 remaining staff of the Pakistan Steel Mills (PSM) will have their services terminated by the government is indeed a sad state of affairs. It is despondent that the country’s largest industrial unit has failed so badly in managing its liabilities and losses. It is hoped that the compensation package of about Rs19 billion alleviates the brunt of termination for the former employees in these harsh times, and final dues of retired employees and 650 pensioners are promptly given to put an end to this chapter.

While mass job losses are always a tragic occurrence, this was a necessary step by the Economic Coordination Committee (ECC). PSM, which has been closed since 2015, instead of bringing growth and prosperity, was becoming a massive drain on the country’s resources, with the total losses and liabilities of the mills going beyond Rs500bn. Import of steel, that should have been produced at the defunct PSM, was costing about $2.5bn in foreign exchange loss per annum to the country. PSM has all the ingredients for success – it has an ideal location, good market and ready investors via the Pak-China Investment Bank. If its corrupt and inefficient structure is completely torn down and revived through privatisation, it stands the chance of becoming a profitable enterprise.

The sad truth is that the PSM is one of many large government-owned enterprises that are loss-making and in dire need of change. These institutions suffer from inefficient structures and overstaffing, with many essentially looking to the state for a monthly paycheck that does not require any work. The inevitable unemployment that would result from an overhaul of these businesses deters the government from taking decisive steps to make them more efficient. Yet if Pakistan’s balance of payments is ever to improve, these difficult decisions need to be taken.